While towns run dry, cotton extracts 5 Sydney Harbours’ worth of Murray Darling water a year. It’s time to reset the balance



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Quentin Grafton, Crawford School of Public Policy, Australian National University

The rains have finally arrived in the Northern Murray Darling Basin. Hopefully, this drought-easing water will flow all the way down to the parched communities and degraded habitats of the lower Darling.

How much water goes downstream, however, does not just depend on how much it has rained.

It also greatly depends on how much is extracted and consumed upstream, and the rules and enforcement around these water extractions.

Simplistic or knee-jerk responses to water insecurity, such as banning irrigation for “thirsty crops” such as cotton, will not fix the water woes of the basin.

The harder and longer path is to deliver real water reform as was agreed to by all governments in the 2004 National Water Initiative and that includes transparent water planning enshrined in law.




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Basin cotton irrigators extract about five Sydney Harbours’ worth a year

Irrigation accounts for about 70% of all surface water extracted in the basin.

Australia’s water accounts tell us that in 2017-18, basin cotton irrigators extracted some 2,500 billion litres (about five Sydney Harbours’ worth) or equivalent to about 35% of all the water extracted for irrigation.

Most of this water was extracted in the Northern Basin (covering southern Queensland and northern New South Wales). But increasingly cotton is becoming a preferred crop in the Southern Basin (southern NSW to South Australia).

Overall, the area of land in cotton and the water extracted for cotton increased by 4% in 2017-18 relative to 2016-17.

Cotton is a thirsty crop. According to the Australian Bureau of Statistics cotton uses, on average, more than 7 million litres (or about three Olympic-sized swimming pools) per hectare.

At a global scale, the volume of water extracted by cotton irrigators to produce one kilogram of cotton fabric averages more than 3,000 litres.

Cotton is a thirsty crop.
Shutterstock

Increased water efficiency: good news for some, bad news for others

Concerns over how much water cotton uses, and the high price of water in the basin, has incentivised cotton farmers to increase their cotton yield (in tonnes) per million litres of water extracted.

This has been achieved with improved genetics, management and more high-tech irrigation methods. According to Cotton Australia, much less water (only 19%) is flowing back into streams and groundwater from water applied to cotton fields than two decades ago, when the return flows were 43% of the water applied.

Increased irrigation efficiency is good news for cotton irrigators, especially those that received some of the A$4 billion in public money already spent to increase irrigation efficiency in the basin. But it is bad news for downstream irrigators, communities and the environment.

This is because a much greater proportion of the water extracted by cotton farmers now gets consumed as evapo-transpiration, and thus is unavailable for anyone or anything else.

We need to change the rules of the game

Given these cotton facts, would banning the growing of cotton in Australia increase the water available? No – because the problem is not cotton irrigation per se, but rather the “rules of the game” of the who, how, and when water is extracted. These water sharing rules are determined at a state level in what are called Water Sharing Plans.

Proper water planning is the only way to ensure a fair deal, deliver on the intent of the 2012 Basin Plan and keep levels of water extraction at sustainable levels.

Water sharing plans are supposed to be consistent with the 2012 Basin Plan. But NSW has, so far, failed to provide its plans for auditing by the Murray-Darling Basin Authority, missing the key July 1, 2019 deadline.

Following an expose of alleged water theft in July 2017, the NSW government created a specialised agency, the Natural Resources Access Regulator, that has greatly helped water monitoring and compliance in NSW. Despite its best efforts, there is still inadequate metering in the Northern Basin. And across the basin as a whole, most groundwater extractions are not properly monitored.

The actual rules about how much water can be extracted are substantially influenced by some irrigators in the consultation process before plans are implemented.

Such influence has resulted in some water sharing plans favouring upstream irrigators at the expense of downstream communities, such as Walgett and Wilcannia. These towns have been left high and dry despite the fact NSW law gives priority to town water supplies over other water uses.

According to the NSW Natural Resources Commission, the current Barwon-Darling Water Sharing Plan “effectively prioritises upstream water users” and also does not provide protection for environmental water from extraction.

The Natural Resources Commission also observed that extraction permitted under the plan:

has affected those communities and landholders reliant on the river for domestic and stock water supplies, town water supply, community and social needs.

A consultant’s report from 2019, written for the NSW government, also found no evidence in the Barwon-Darling water planning processes of reporting on performance indicators such as changes in stream flow regimes, ecological values of key water sources or water utility (for town supply) access requirements.

Sadly, the problem of poor water planning is not exclusive to the Barwon-Darling, but exists in other basin catchments in NSW, and beyond.

Holding governments responsible

Any effective solution to the water emergency in the basin must, therefore, hold governments responsible for their water plans and decisions. This requires that a “who, what, how and when” of water be made transparent through an independent water auditing, monitoring and compliance process.

Simplistic responses to water insecurity, such as banning irrigation for cotton, will not fix the water woes of the basin. The harder and longer path is to deliver real water reform as was agreed to by all governments in the 2004 National Water Initiative and that included transparent water planning enshrined in law.




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Three things that would make a difference

As a nation we must hold decisionmakers accountable so the rules of the game do not favour the big end of town at the expense, and even the existence, of towns.

We also need to:

  1. stop wasting billions on irrigation subsidies that reduce flows to streams and rivers
  2. monitor, measure and audit what is happening to the water extracted and in streams
  3. actually deliver on the key objects of the federal Water Act and state water acts.

Enforcing the law of the land would ensure those who have the legal right to get the water first (such as town water supplies) are prioritised in the implementation of water sharing plans. It would mean state water plans are audited and actually deliver environmentally sustainable levels of water extraction.The Conversation

Quentin Grafton, Director of the Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Up the creek: the $85 million plan to desalinate water for drought relief


Lin Crase, University of South Australia

The deal to crank up Adelaide’s desalination plant to make more water available to farmers in the drought-stricken Murray-Darling Basin makes no sense.

It involves the federal government paying the South Australian government up to A$100 million to produce more water for Adelaide using the little-used desalination plant.

The plant was commissioned in 2007 at the height of the millennium drought. It can produce up to 100 gigalitres of water a year – enough to fill 40,000 olympic sized swimming pools. But has been used sparingly, operating at its minimum mode of
8 gigalitres a year, because of the expense of turning seawater into freshwater.

The Adelaide Desalination Plant.
Vmenkov/Wikimedia, CC BY-SA

Adelaide has continued to mostly draw water from local reservoirs and the River Murray, which on average has supplied about half the city’s water (sometimes much more).

But with federal funding, the desal plant will be turned on full bore. This will free up 100 gigalitres of water from the Murray River allocated to Adelaide for use by farmers upstream in the Murray Darling’s southern basin.

The southern Murray–Darling Basin.
ABARES, CC BY-NC

The federal government expects the water to be used to grow an extra 120,000 tonnes of fodder for livestock. The water will be sold to farmers at a discount rate of A$100 a megalitre. That’s 10 cents per 1,000 litres.

By comparison, the residential price for that water in Adelaide would be A$2.39 to A$3.70 per 1,000 litres.

The production cost of desalinated water is about 95 cents per 1,000 litres when there’s rainwater already stored, according to a cost-benefit study published by the SA Department of Environment and Water in 2016. That means the total cost for the 100 gigalitres will be about A$95 million.

So the federal government is effectively paying A$95 million to sell water for A$10 million: a loss to taxpayers of A$85 million.


The Conversation, CC BY-ND

What do we get for the money?

The discounted water provided to individual farmers will be capped at no more than 25 megalitres. The farmers must agree to not sell the water to others and to use it to grow fodder for livestock.

There are many different forms of fodder but livestock producers most favour lucerne hay because it is highly nutritious. But it is also more expensive than cereal, pasture or straw hay.

The amount of hay that can be grown with a megalitre of irrigation water depends on many things, but 120,000 tonnes with 100 gigalitres is possible in the right conditions.

In the Murray-Darling southern basin lucerne hay currently sells for A$450 to A$600 a tonne. That would make the market value of 120,000 tonnes of lucerne A$54 million to A$72 million.

It means, on a best-case scenario, the federal government will be spending A$85 million to subsidise the production of hay worth A$72 million to its producers.




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The reality of farming

In practice farms and farmers are incredible diverse, so not all irrigators will necessarily grow lucerne. Alternative fodders such as pasture or cereal hay generally have much lower market values. Which meaning the value of the fodder produced may be much less than the best-case scenario.

It’s worrying that this policy shows such little regard for farming realities. It appears to have been crafted on the premise that every farmer has the same land, the same equipment and the same needs.

Dictating the water must be used for a single purpose runs counter to the needs of the agriculture sector. If farmers could put it to a more effective use, why not allow it?

In addition, it’s not clear how all the monitoring will be done to maintain compliance over such a restrictive regime.

What measures will prevent farmers buying the discounted water and then simply selling an equivalent amount of any carry-over allocation at the going rate of up to $1,000 a megalitre?




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How will the government distinguish between the fodder grown with the 25 megalitres provided at low cost and any other fodder harvested on the same farm? How much will it cost to monitor and enforce such arrangements?

The difficulty of answering these types of questions is precisely the reason why countries in the former eastern bloc failed to adequately provide for their populations. Telling people what crop to grow, when to grow, how to water the crop and how it should be consumed has not worked in the past. Farm businesses that respond to prices and use inputs, including water, in a way that suits their long- term commercial needs are generally better off.

It seems a long way from the type of national drought policy Australia needs. It’s hard to see how a policy of this kind does anything other than waste a large amount of public money and disrupt important market mechanisms in agriculture in the process.The Conversation

Lin Crase, Professor of Economics and Head of School, University of South Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: Joyce could be facing waves at a judicial inquiry after the election


Michelle Grattan, University of Canberra

It’s hard to believe Barnaby Joyce really wants to lead the Nationals again. Of course everyone knows he does, desperately, but his unhinged ABC interview with Patricia Karvelas on Monday showed a breathtaking absence of political judgement or personal restraint.

Joyce went on the program to defend his conduct in the 2017 A$79 million water buyback from two Queensland properties owned by Eastern Australia Agriculture (EAA).

Regardless of how his approval of this deal will ultimately be judged, his shouting, interruptions and at times absurd language drowned out any chance of his getting his points across.

Joyce loyalists will see it as Barnaby-being-Barnaby. But it was further reason for Nationals to despair about the parlous state of their party, as they watch an ineffective leader and an out-of-control aspirant.

The Joyce interview made it harder for the government to manage this big distraction in a messy second campaign week.

The controversy over the water purchase is based on an old story; the election has enabled it to be resurrected for a powerful fresh spin around the political circuit.

Water expert Quentin Grafton, professor of economics at the Crawford School at the Australian National University, lays out the issues.

Grafton estimates the Commonwealth paid about $40 million too much for this water. He identifies three areas of concern: the government’s failure to get value for money (remembering this was floodwater, which is unreliable); the lack of transparency in the deal, and the nature of the process – a negotiated sale rather than an open tender.

Much has been made of EAA being a subsidiary of Eastern Australian Irrigation (EAI), which is based in the Cayman Islands, a tax haven. This does, however, seem an irrelevance in the context of the value for money issue.

Also, it is one thing to say tax avoidance structures should be cracked down on, quite another to suggest the government should decline to deal with a company with a structure that accords with the law.

There has also been talk about Energy Minister Angus Taylor. As a business consultant Taylor helped set up the two companies and was a director of each.

But according to Taylor’s office he ended all links before entering parliament, never had a direct or indirect financial interest in EAA or any associated company, had no knowledge of the water buyback until after it happened, and received no benefit from this transaction.

So the questions in this affair centre on the conduct of the Agriculture Department and its then minister.

Grafton says: “Either the public servants were incompetent in relation to understanding value for money – or there’s an alternative explanation.”

The department is sensitive, taking the unusual step during Easter (and in the “caretaker” period) of issuing a statement defending its actions. It said it had done “due diligence”. The water purchase had been consistent with Commonwealth Procurement Rules “and paid at a fair market rate, as informed by independent market valuation,” the statement said.




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Joyce is known in general to have been a meddling minister.

In this case, he insists he followed departmental advice in approving the purchase, and had been at arms length from the deal.

“My role was never to actually select a purchaser or to determine a price,” he told a Tuesday news conference. But he approved the authority to negotiate without tender, and imposed conditions, including having the department report back to him before finalising the deal.

The current Minister for Agriculture and Water Resources, David Littleproud, tried to stem the damage on Tuesday by asking the Auditor-General to inquire into the matter. Littleproud added a political twist, requesting the audit to look back as far as 2008, to encompass Labor’s period.

But this wasn’t going to satisfy Labor in an election campaign.

The opposition had demanded documents by the end of Tuesday; predictably, it didn’t get what it wanted.

Bill Shorten had already flagged the need for a judicial inquiry.

Late Tuesday, environment spokesman Tony Burke accused Scott Morrison of “trying to cover up his government’s incompetence, chaos and potential misconduct”.

“It is now clear that there needs to be an independent inquiry into the Eastern Australia Agriculture scandal, with coercive powers so that Australians can get the truth,” Burke said. (That inquiry, however, wouldn’t be probing Labor deals.)

If Labor wins on May 18, yet again we will see a government launch an investigation into the conduct of its predecessor. If this comes to pass, Joyce will find himself in the witness box, a prospect he seems to relish – at least now.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia’s ‘watergate’: here’s what taxpayers need to know about water buybacks



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The federal government committed to reducing water extraction from the Murray-Darling Basin.
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Lin Crase, University of South Australia

In 2017, the then agriculture minister, Barnaby Joyce, signed off on an A$80 million purchase of a water entitlement from a company called Eastern Australia Agriculture.

The problem is that Energy Minister Angus Taylor used to be a director of Eastern Australia Agriculture – though he didn’t have a financial interest – and the company is a Liberal party donor. What’s more, the value of the water purchased for A$80 million is under question.

Now, as the election looms, this issue has resurfaced. But why should taxpayers be concerned?




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Water buybacks using an open tender were halted by the current government in 2015, even though this is the most cost-effective way to set aside water for the environment. Instead, the government pronounced that subsidies for irrigators were a better deal.

Until 2015, the government bought back most water using an open tender process, before it was replaced by a subsidy scheme for irrigation and occasional closed tenders.

The problem with the closed tender process is that it tends to lack transparency, which raises questions about how effectively the government is spending public money. And it’s hard to prove closed tenders deliver the most cost effective outcome.

The Murray-Darling Basin is a very productive agricultural zone and its rivers have been used to boost agricultural outputs through irrigation.

State governments spent much of the 20th century allocating this water to agricultural users. By the 1990s it was clear too much water was being extracted. This resulted in both harm to the river environment and potential reduced reliability for those with existing water rights.

Various attempts to rein in extractions were made around this time, but ultimately the Murray-Darling Basin Plan was adopted to deal with the problem.

In agreeing on the plan, the federal government committed to spending A$13 billion to reduce the amount of water being extracted from the Murray-Darling Basin. To accomplish this the government has two basic strategies.

One involves buying up existing rights for water use. The other hinges on using subsidies so farmers use less water when irrigating.

Reducing water extraction from the basin

The second approach of using subsidies is generally more politically appealing. This is because few farmers ever object to receiving a subsidy and the public has an affinity with the idea of “saving” water.




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The problem, however, is that subsidies are a more costly way of returning water to the river system than simply buying back existing water rights. And so-called water savings are hard to measure how much water savings are a result of subsidies or some other factor.

This is why some analysts even claim subsidies are reducing the level of water available for the environment.

Buying back water rights is generally more cost-effective than providing subsidies. But a clear and transparant process still matters because water rights are not the same for everyone and it’s a complex process to determine their overall value.

Allocations and entitlements

First, most water users hold a legal right, known as an entitlement. Water entitlements represent the long-term amount of water that can be taken and used – subject to rain, of course.

Second, water allocations represent the amount of water currently available against a given entitlement – this is the water that is available now.

If a farmer owns an entitlement in the River Murray, chances are the annual allocation will be determined by how much water has flowed into upstream storages like Hume Dam, Dartmouth Dam or Lake Eildon.

Even then the allocation will vary, depending on which state issued the original entitlement. For instance, New South Wales water is generally allocated more aggressively. This means NSW entitlements tend to be less reliable in dry years than Victorian or South Australian entitlements.

If a farmer owns an entitlement where there are no upstream storages, as is the case with much of the Darling River system, then the allocation will vary depending on how much water is flowing in the river.




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So what?

All of this means the amount of water that can actually be used for the environment when an entitlement passes to the government will depend heavily on the underlying characteristics of the water right.

Partly for this reason, water buybacks were historically conducted using an open tender process.

This meant the government would announce its willingness to buy water entitlements. Farmers would then notify the government about what entitlements they held and the price they were prepared to take.




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Running an open tender allowed the government to assess the value for money of the different entitlements on offer at the time.

Water buybacks through open tender began seriously in about 2007 to 2008. This meant the price owners were prepared to sell for would be registered, and then the government would determine which offer provided the best value. Around 60% of all water now held for the environment by the Commonwealth was secured through open tenders.

As a general rule, a relatively high-reliability water entitlement was bought for about $2,000 per megalitre and this has become the metric for many in the market. But the current government halted this process in 2015.

Now, the government buys water through direct negotiation with water-entitlement holders.

The government justified ending open-tender buybacks on the basis that the water being secured was causing undue harm to rural and regional communities. And, instead, much more expensive subsidies would supposedly generate a better overall return.

This view is not universally shared. The receipts from openly tendered water entitlements were being used by many farmers to adjust their business, while still staying in the region.

Many rural communities continue to thrive, regardless of the strategy chosen to secure water for the environment. Subsidies also tend to favour particular irrigators rather than the community in general.




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Having set aside the cheapest option of open-tender buybacks and declaring support for irrigation subsidies, the problem the government now faces is that it must explain why closed tenders persisted (albeit in isolated cases) and were signed off by Ministers as good value for money.

Closed tenders need not deliver a poor outcome for taxpayers. But it does mean the likelihood of establishing the best value for money is reduced, simply because there are fewer reference points.

And if it’s legitimate to overspend public money on irrigation infrastructure subsidies, the credibility of a supposedly cost-effective closed tender is also brought into question.The Conversation

Lin Crase, Professor of Economics and Head of School, University of South Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.